Three Ways to Manage Your Invoices (& Bills)
As a busy business owner, you undoubtedly have your hands in every part of your business. One area that may seem routine but does require good attention to detail is managing your invoices and bills. Invoices and bills are the core of the revenue and expenses of your business. Managing both efficiently and effectively can save time and increase cash flow. Let us go over some effective ways of how to manage your invoices and bills.
How to Manage Invoices
Let’s start with some ways to effectively manage the invoices you send to customers. Because payments on invoices directly affect your revenues, proper invoice management is essential.
Automate Your Invoice Processing
Businesses both large and small should take advantage of automated invoicing. Many accounting programs such as QuickBooks or Bill.com have features that make setting up automatic invoicing quick and easy. There are several advantages to using this method of invoicing instead of manual or paper invoices.
Automated invoicing ensures that invoices are sent timely and nothing is overlooked. Duplicate and erroneous invoices are also flagged, making it much more likely an error is caught before the invoice is sent. Finally, automating your invoicing saves time by allowing your accountant or bookkeeper to work on other tasks.
Leverage Invoicing To Maintain or Increase Cash Flow
Invoicing is a valuable tool to maintain and balance cash flow if done correctly. Once your invoicing process is running smoothly, spend some time evaluating invoice terms and current cash flow. For example, are you offering discounts for early payments? What about discounts for cash payments? Remember, cash is king when it comes to cash flow, and adjusting terms to incentivize cash payments is key to increasing cash flow through invoice management.
Similar ideas may also work for electronic payments. If a customer wants to automate their payments by using ACH or a credit card instead of paying by check, adding this feature almost guarantees payment from the customer on a timely basis. It is important to balance discounts with revenue to ensure income remains steady.
Create An Invoicing Checklist
It is important to make sure that the invoices you send have all the essential information included. Using a checklist ensures that nothing is overlooked. A typical invoicing checklist includes these key items:
Vendor Name
Vendor Address
Account Number
Payment Terms (often abbreviated as 2/10 Net 30, which indicates a 2% discount if payment is made within 10 days, with the remainder due in 30 days).
Invoice Number
Invoice Date
Details about the services or products sold.
Once you have your checklist complete, checking off each item ensures completeness.
How to Manage Bills
Paying bills is one of the least exciting but most important business activities. There are ways to manage your bill payments to increase efficiency and even cash flow. Let’s talk about some simple ways to do both.
Use A Bill Management System
It can be easy to get overwhelmed by bills if you do not have a robust bill management system. If you receive paper bills, designating a certain area for bills is a great idea. It does not need to be complicated, using a filing cabinet with alphabetical sections for each vendor will help immensely with organization.
Another option is to use bill management features that come with popular accounting programs like QuickBooks. Most have options to organize your bills in a designated folder, the ability to set up recurring bills, and even pay multiple bills at once. Some apps such as Bill.com allow you to take pictures of bills and make payments all in the same app.
Use Early Payment Discounts
Many companies offer discounts for paying early or in cash. These features can add extensive value over time and using them to your advantage is worth pursuing.
Let’s consider a simple example. One of your oldest vendors charges $1,000 monthly and offers a 2 percent discount if you pay within the first 10 days of the month. If you take advantage of this discount all year, you total $240 in yearly savings. This may seem small, but if you practice the same strategy with other companies, the savings add up.
Automate Online Payments
Business owners are busy, and it can be easy to overlook sending out a check for a bill that is due. Instead of sending in monthly checks, check if your vendor takes online payments. Making payments online reduces the chance the check will be lost, misapplied, or simply overlooked.
Recurring online payments are even better. The process is usually simple, and automating the bill paying process takes one more thing off your plate. Many companies prefer online and recurring payments and offer discounts if this method is chosen.
Additional Tips
Here are some additional tips to keep your bill management on the right track.
Dedicate an hour each week to bill management tasks, such as filing, backup, and processing. This will keep bills organized and on time
Empower one person or a small team to manage and pay bills
Keep track of cash flow so no payments are returned
Organize bills by date, to ensure the ones with an approaching due date are paid first
